USDA GAIN: Livestock and Products

China - Livestock and Products Annual 2011

Pork production in 2012 is forecast to increase four per cent, following a three per cent decline this year, according to Michael Woolsey and Jianping Zhang in the latest GAIN Report from the USDA Foreign Agricultural Service.

FAS Beijing forecasts China’s beef production in 2012 will continue to decline to nearly 5.52 million metric tons (MMT), down one per cent from the year before. Meanwhile, pork production in 2012 will rise four per cent to 51.3MMT following a three per cent decline in 2011.

High prices and resumption in subsidies this summer are encouraging herd expansion and this will boost output beginning early 2012. Lower domestic beef production will encourage higher beef imports, with sales forecast to rise seven per cent to 45,000 metric tons (MT) in 2012. Pork imports are forecast to rise eight per cent to 480,000MT, fuelled by continued strong Chinese pork demand. Meanwhile, China’s live hog imports will continue rising, reaching 12,000 head in 2012, up 20 per cent from estimated 10,000 sales in 2011. China’s live cattle imports in 2012, almost all breeding dairy cows, are expected to recover four per cent to 75,000 head due to rising demand from the dairy sector.

Executive Summary

FAS Beijing (Post) forecasts China’s 2012 total meat production will rise three per cent to 81.4 million metric tons (MMT), following an estimated one per cent decline in the previous year. Beef, pork, sheep & goat and poultry meat shares are estimated to account for nearly seven per cent, 63 per cent, six per cent, and 23 per cent, respectively.

Beef production in 2012 is forecast to continue downward to 5.5MMT as comparatively poor farm returns for raising beef cattle dampen incentive to expand herd size. Lower domestic production will raise imports seven per cent to 45,000MT carcass weight equivalent (CWE). Beef exports in 2012 are forecast to increase four per cent to 57,000MT (CWE), fuelled by higher demand in China’s traditional export markets in Asia.

Live cattle imports in 2012, almost all breeding dairy cows, are forecast at 75,000 head, a four per cent recovery from an estimated 15 per cent decline in 2011. The lower than expected imports in 2011 are due to short cow supplies from Australia, the largest supplier to China’s imports, and considerably higher international cattle prices.

Pork production in 2012 is forecast to jump four per cent to 51.3MMT from an estimated three per cent decline in the previous year. Fuelled by sharply higher prices in 2011, China’s pork producers are steadily expanding herd size and this will help boost pork output beginning early 2012. Production growth is also being supported by China’s decision in July 2011 to resume a 100-yuan (CNY; US$15.60) per sow subsidy and introduce other policies to encourage herd expansion.

Despite the expected recovery in pork production, China’s pork imports will continue to rise due to strong pork demand and competitive pricing on imports. Overall, pork imports in 2012 are expected to increase eight per cent to 480,000MT (CWE), while pork offal imports in 2012 are expected to increase 10 per cent to over 700,000MT, product weight (PW). Pork exports in 2012 are forecast to rise five per cent to 272,000MT (CWE) due to strong demand in China’s traditional Asian export markets.

China’s live swine imports in 2012 are forecast at 12,000 head, up 20 per cent from estimated imports in 2011. Imports in 2011 are forecast to nearly double to 10,000 head. Nearly all these imports are breeding swine. Sales are rising due to a strong need for improved genetics, high pork market prices, and China’s aforementioned decision this summer to restore sow subsidies.

Swine and Pork

2012 Pork Production Forecast to Rise Four Per Cent

Fuelled by sharply higher prices in 2011, China’s pork producers are steadily expanding herd size and this will help boost pork output beginning early 2012. Production growth is also being supported by China’s decision in July 2011 to resume a 100-yuan (CNY; US$15.60) per sow subsidy and introduce other policies to encourage herd expansion. Overall, production is expected to reach 51.3 million tons, up four per cent from 2011.

In 2011, Post estimates China’s pork supplies will fall three per cent. Reduced supply this year is due primarily to low prices through the first half of 2010, which encouraged many smaller producers to exit hog farming, followed unusually severe and persistent outbreaks animal disease, such as foot and mouth disease (FMD), swine blue ear disease (PRRS) and pig epidemic diarrhoea in piglets in late 2010 and early 2011. Lower hog supplies coupled with continued strong pork demand have created sharply higher hog prices this year, reaching CNY18.75 ($2.93) per kilogram in July, up 68 per cent from July 2010. The expectation that prices will continue at a high level has encouraged herd expansion in 2011. With strong demand for piglets and tight supplies, piglet price has soared to over CNY34 ($5.40) per kilogram in July, more than double the level in July 2010.

Surging pork prices in China this year became a top policy concern in 2011 as pork is a staple in China’s diet and affordable pork is considered important for social stability. In response, the leadership provided additional incentives this summer to expand herd size and reduce pork prices for China’s consumers, by improving hog farm returns. In July 2011, policy-makers resumed productive sow subsidies providing CNY100 ($15.6) per animal. The total annual value of this support is estimated at CNY2.5 billion ($391 million).

Sow subsidies were initially introduced in 2007 to rebuild herd size following a severe outbreak of blue ear disease. These were suspended in mid-2010 due to oversupply. Other measures introduced this summer include higher producer supports in case of disease, such as raising payments for each culled animal – from CNY600 ($94) to CNY800 ($125) – and each dead hog presented at slaughter – from CNY500 ($78.1) to CNY800 ($125) per animal.

While production will expand next year, it is possible total hog inventories may not reach early 2010 levels until beyond 2012. Enthusiasm for raising pigs among small backyard operators – which account for the great majority of hog farms and output – is being dampened by high costs of feed, with corn prices in China this summer topping CNY2,330 ($364), up 17 per cent from the same month last year.

Threats of animal disease are another concern, fuelled by persistent doubts among small producers about the effectiveness of animal drugs for FMD and PRRS provided free by the government. Small producers also fear another cycle of oversupply and low prices in the future.

Finally, continuing wage hikes for migrant workers in China’s medium- and large-sized cities make hog farming less attractive by comparison for many small farmers. Meanwhile, large-scale operators report that difficulties in acquiring additional farm land are hampering their expansion plans. Combined these factors will limit production gains and support higher than normal prices in 2012.

Table 2. Number of Chinese pig farms by herd sizes, 2007-2009

2,007

2,008

2,009

Per cent
change 2009/08

Annual slaughter
(no. of head)

Farms

Farms

Farms

Farms

1-49

80,140,750

69,960,452

64,599,143

-7.66

50-99

1,577,645

1,623,484

1,653,865

1.87

100-499

542,014

633,971

689,739

8.80

500-999

83,731

108,676

129,369

19.04

1,000-2,999

30,053

40,010

46,429

16.04

3,000-4,999

6,146

8,744

10,342

18.28

5,000-9,999

2,840

4,172

5,117

22.65

10,000-49,000

1,803

2,432

3,083

26.77

50,000 and above

50

69

96

39.13

Source: The Ministry of Agriculture

China Resumes Subsidies for Large-Scale Hog Farms

In continuation of China’s policy to encourage more scale, standardisation, modernisation and integration in Chinese hog farming, the central government has reportedly resumed payments for large-sized operations, under a scheme entitled the ‘large-scale standardised swine farm subsidy’. While subsidy amounts have not yet been announced, the minimum farm size to be eligible for the payment is at least an annual slaughter of 5,000 head. This is up from 500 head for a similar subsidy that was introduced in 2009, entitled the ‘standardised swine raising farm subsidy’. Payments were suspended in 2010 due to hog oversupply. In 2009, farms with 5,000 head or more were eligible for a one-time payment of CNY800,000 ($126,000). Farms that received the payment in 2009 will not be eligible in 2011. In addition to minimum herd size, farms must meet certain conditions to be eligible, including a requirement that they are either new or improved.

Total and Per-Capita Pork Consumption on the Rise in 2012

With the expected increase in domestic pork production and higher pork imports, China’s total pork consumption in 2012 is forecast to increase nearly four per cent to 51.5MMT from estimated 49.7MMT in the previous year. Per-capita consumption will reach 38kg, up from 37kg in 2011.

China’s 2011 pork consumption is forecast three per cent downward, due to sharply higher domestic pork prices caused by a smaller slaughter, which will drive part of Chinese consumption to switch to cheaper poultry meat or red variety meats in 2011.

Swine and Pork Imports Forecast Higher for 2012

With only moderate growth in domestic pork production and high domestic pork prices, China’s pork imports will continue higher through 2012. Pork imports in 2012 are forecast to increase eight per cent to 480,000MT. Pork offal imports in 2012 are forecast to increase 15 per cent to over 700,000MT.

A significant change in China’s imports in 2011 is that direct shipments are on the rise, while Hong Kong re-exports to China are decreasing. For direct shipments alone, China’s market size for imported pork in 2011 is about $351 million with US exports accounting for 42 per cent of the total market. Imports of pork offal in 2011 could exceed $1.2 billion. The United States currently accounts for 58 per cent of China’s total pork offal imports. Offal will continue to dominate China’s total pork product imports for the foreseeable future.

China’s live swine imports in 2012 are forecast at 12,000 head, a 20 per cent increase from estimated imports in 2011. Imports in 2011 are forecast to nearly double to 10,000 head. Nearly all these imports are breeding swine. Sales are rising due to a strong need for improved genetics, high pork market prices, and China’s aforementioned decision in July 2011 to resume sow subsidies of CNY100 ($1.56) for each productive sow.

China lifted its H1N1 ban on US live swine in April 2011 and US sales are gradually picking up as US exporters resume outreach to Chinese buyers. However, Chinese buyers report a shift in preference to swine from the EU and US exporters will need to expand marketing efforts to restore US dominance of the Chinese live swine import market prior to the 2009 H1N1 ban. In the first half of 2011, the United Kingdom and France accounted for 80 per cent of China’s total swine imports.

Pork Exports in 2012 Forecast to Rise 8 Per Cent; Live Swine Exports to Remain Flat

With domestic pork production climbing, China’s pork exports in 2012 are forecast at 280,000MT (CWE), an eight per cent increase from estimated 260,000MT (CWE) in the previous year, fuelled by strong demand in China’s traditional export markets in Asia. Most gains will come from Malaysia and the Philippines, where Chinese export prices are competitive. Exports in 2011 are forecast lower than the previous estimate due to smaller domestic slaughter and pork production impacted by animal diseases.

China’s live swine exports to Hong Kong and Macau for local fresh meat consumption in 2012 are forecast to be roughly unchanged at 1.65 million head. These two destinations account for all of China’s live hog exports and export growth continues to be dampened by limited slaughter capacity and flat demand in these markets.